We show that any objective risk measurement algorithm mandated by central banks for regulated financial entities will … result in more risk being taken on by those financial entities than would otherwise be the case. Furthermore, the risks taken …: continue regulating by enforcing risk measurement algorithms at the cost of occasional severe crises, regulate more severely …

The recent experience from the global financial crisis has raised serious doubts about the accuracy of standard risk … measures as a tool to quantify extreme downward risks. Standard risk measures are subject to a “model risk” due to the … specification and estimation uncertainty. We propose a general adjustment of the Value-at-Risk to compute risk measures robust to …

We provide an economic valuation of the riskiness of risk models. We estimate the impact of model risks (estimation and … specification) on VaR estimates. We find that integrating the model risk into the VaR computations implies a substantial correction … relies on a backtesting framework, for integrating the global model risk into VaR estimates …

Reinsurance is a transaction insurance firms use to hedge risk. Existing studies have only investigated the demand for …

insurance on risk-neutral pricing and shortfall risk. In general, these feedback mechanisms affect the contract's payoff and … hence directly influence pricing and risk measurement. To isolate the effect of such strategies on shortfall risk, we …

A traditional VaR approach is not suitable to assess the risk that merger arbitrage funds carry in their portfolios. We … propose a simple two-state or three-state model that captures the risk characteristics of the deals in which merger arbitrage …

A traditional VaR approach is not suitable to assess the risk of merger arbitrage hedge funds. We recently proposed a … simple two- or three-state model that captures the risk characteristics of the deals in which merger arbitrage funds invest …. Here, we refine the model, and demonstrate that it captures merger and acquisition risk characteristics using over 4000 …

This paper decomposes the popular risk measure Value-at-Risk (VaR) into one jump- and one continuous component. The … continuous component corresponds to general market risk and the jump component is proportional to the event risk as defined in … the Basel II accord. We find that event risk, which is currently not incorporated into most banks' VaR models, comprises a …

. There is now a growing tendency for risk manager to bypass traditional insurance markets, and a variety of instruments … designed directly to transfer risk to the financial markets. After a couple of years of low catastrophe claims, 1998 claims are …

. This reward for risk represents a different form of income than is usually recognized in economic theory (i.e., rent, wages … and labor. However, a fourth factor is also critical – enterprise, or risk-taking, which is typically rewarded with profit …, whether it is a reward for risk, and whether it accrues to the capitalist or the entrepreneur. Critiques especially the …